Thoughtful discussions on politics and economics with some sidelights in photography and astronomy.

Feb 21, 2017

Trump’s Policies Will Actually Hurt Employment

Donald Trump has promised to bring back all those coal and manufacturing jobs. It’s not going to happen, despite what his supporters may choose to believe. In fact, his policies will actual probably hinder job growth, especially since it looks like the US is already near what the Fed calls “full employment”.

You wouldn’t think that the Muslim ban would have an effect on US job growth, but it probably will have a real negative effect. The Boston Globe is reporting that the tourist industry is already seeing a significant drop-off in booking searches. One research site said that international flight searches to the US had fallen nearly 7% since Trump announced his Muslim ban. Particular distressing was Trump’s alienation of China and Mexico, as those two countries represent a large number of visitors to the US. It is hard to believe, but the number of international tourists to the US just reached pre-9/11 levels only last year. According to David Scowsill, president and CEO of the World Travel & Tourism Council, “The US is in danger of taking the same path it took after Sept. 11, which led to a decade of economic stagnation in the travel and tourism sector. Strict visa policies and inward-looking sentiment led to a $600 billion loss in tourism revenues in the decade post 9/11.”

The Muslim ban will also reduce the incentives for foreign students to come study and potentially live here. That will be an immediate hit for some universities and graduate schools and a real loss for the future growth and productivity of the US economy.

In addition, Trump’s immigration policies will also end up being a drag on GDP. Calculated Risk highlights a study from Goldman Sachs shows that net immigration accounts for between 40% and 50% of the recent population growth in the US. These immigrants tend to be younger and more likely to enter the labor force. A smaller work force will then mean a weaker GDP and potentially lower productivity. As the study notes, “Reduced immigration would result in slower labor force growth and therefore slower growth in potential GDP — the economy’s ‘speed limit’. In addition, academic studies suggest there could be negative knock-on effects on productivity growth. As a result, we see immigration restrictions as an important source of downside risk to our 1.75% estimate of potential growth.” In addition, mass deportations of millions of immigrants will create disruption in many other industries. I have already written about the concerns of the farmers in California and their worry that they will not be able to find workers to pick and pack their crops.

Trump’s roll back of regulations will not create any significant number of jobs either, despite the propaganda that resonates in the right wing echo chamber. His roll back of the stream protection rule will maybe save around 70 coal jobs, despite supporters’ belief that Trump had saved 70,000 jobs with the stroke of his pen. “If he hadn’t gotten into office, 70,000 miners would have been put out of work,” Patricia Nana, a 42-year-old naturalized citizen from Cameroon. “I saw the ceremony where he signed that bill, giving them their jobs back, and he had miners with their hard hats and everything — you could see how happy they were.” Not really. Natural gas, solar, and wind are all cheaper alternatives to coal and that is not likely to change any time in the near future. This will lead to further declines in employment in the coal industry. And any growth in the industry will probably come out West in Wyoming, where it is cheaper to extract coal, rather than Appalachia.

In the oil industry, a New York Times story the other day illustrates how automation is eliminating jobs even in the oil industry. Since 2014, the oil industry has lost 163,000 jobs but those jobs are returning as the price of oil rises. However, it is estimated that a third to one half of those jobs will not come back because they have been automated. In Texas, a drilling firm has added 240 wells without adding a single worker. Said one oil worker, “I don’t see a future. Pretty soon every rig will have one worker and a robot.”

Trump’s supporters may believe that he will bring manufacturing and coal jobs back, but it’s not going to happen. They will deny that reality for a time, but it will eventually sink in. And Trump’s policies on immigration and travel will actually only make the employment situation worse.

[I’ve also written about this and other issues on my personal blog at tidalsoundings.blogspot.com]